Question: Twenty five years ago the U S government issued thirty year bonds with
Twenty-five years ago, the U.S. government issued thirty-year bonds with a coupon rate of about 8%. Five years ago, the U.S. government sold ten-year bonds with a coupon rate of about 5%. Suppose that the current coupon rate on newly issued five-year Treasury bonds is 2.5%. For an investor seeking a low-risk investment maturing in five years, do the bonds issued twenty-five years ago with a much higher coupon rate provide a more attractive return than the new five-year bonds? What about the ten-year bonds issued five years ago?
Relevant QuestionsExplain why municipal bonds can offer lower interest rates than equally risky corporate bonds. A bond makes two $45 interest payments each year. Given that the bond’s par value is $1,000 and its price is $1,050, calculate the bond’s coupon rate and coupon yield. A bond makes annual interest payments of $75. The bond matures in 4 years, has a par value of $1,000, and sells for $975.30. What is the bond’s yield to maturity (YTM)? A zero-coupon bond has a $1,000 face value, matures in 10 years, and currently sells for $781.20. a. What is the market's required return on this bond? b. Suppose you hold this bond for 1 year and sell it. At the time you ...Describe the role of the lead underwriter in a firm-commitment offering.
Post your question